<PAGE>

                                                                   EXHIBIT 10.41

                               GUARANTY OF PAYMENT

                                     OF DEBT

                                       OF

                          FOREST CITY ENTERPRISES, INC.

                           DATED AS OF MARCH 22, 2004

                           --------------------------

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                                TABLE OF CONTENTS

<TABLE>
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                                                                            Page
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<S>                                                                         <C>
1. DEFINITIONS ..........................................................      1

2. ACKNOWLEDGMENTS, CONSIDERATION .......................................      8

3. GUARANTY .............................................................      8

4. REINSTATEMENT ........................................................      9

5. WAIVERS ..............................................................      9

6. ADDITIONAL AGREEMENTS ................................................      9

7. REPRESENTATIONS AND WARRANTIES .......................................     10

8. NOTICES ..............................................................     11

9. COVENANTS ............................................................     11

10. DEFAULT; REMEDIES ...................................................     25

11. MISCELLANEOUS .......................................................     28

12. JURY TRIAL WAIVER ...................................................     28

13. NOTICES .............................................................     28

14. CONSENT TO JURISDICTION .............................................     29

15. ENTIRE AGREEMENT ....................................................     29

16. INDEPENDENCE OF COVENANTS ...........................................     29
</TABLE>


                                      (i)
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                           GUARANTY OF PAYMENT OF DEBT

                  THIS GUARANTY OF PAYMENT OF DEBT (this "Guaranty") is made and
issued by FOREST CITY ENTERPRISES, INC., an Ohio corporation (the "Guarantor"),
as of this 19th day of March, 2004, in order to induce the Banks (as hereinafter
defined), KEYBANK NATIONAL ASSOCIATION, as agent for the Banks (the "Agent") and
NATIONAL CITY BANK, as syndication agent for the Banks (the "Syndication Agent"
and together with the Agent, the "Agents"), to enter into, and lend money
pursuant to, a certain Credit Agreement of even date herewith (said Credit
Agreement as it may be from time to time amended, restated, or modified being
herein called the "Agreement"), by and among the Banks, the Agents and FOREST
CITY RENTAL PROPERTIES CORPORATION, a subsidiary of the Guarantor (the
"Borrower").

                  1. DEFINITIONS. As used in this Guaranty, the following terms
shall have the following meanings:

                  "Banks" shall mean each of the financing institutions that are
party to the Agreement as of the date of this Guaranty, any other bank(s) that
may become parties to the Agreement after the date hereof, and all successors
and assigns of any such bank; and "Bank" shall mean any one of the foregoing.

                  "Capital Stock" of any Person as used herein shall mean any
and all shares, interests, participations, or other equivalents (however
designated) of corporate stock or other equity participations or interests
including, without limitation, partnership interests, whether general or
limited, and membership interests, whether of managing or non-managing members,
of such Person.

                  "Cash Flow Coverage Ratio" shall mean, for any Test Period,
the ratio of (i) Consolidated Net Operating Cash Flow to (ii) Consolidated
Corporate Debt Service.

                  "Collateral" shall mean, collectively, all property, if any,
securing the Debt or any part thereof at the time in question.

                  "Company" shall mean the Guarantor and/or a Subsidiary of the
Guarantor.

                  "Completion Guaranty" shall mean any performance guarantee by
the Guarantor that construction of a real estate project will be completed in
accordance with applicable plans and specifications and that all costs
associated with such completion will be paid, provided, that such costs may
include an interest reserve only through completion of the project and not
through stabilization of such project.

                  "Consolidated Corporate Debt Service" shall mean, for any
period, the sum of (i) all scheduled payments of principal of (excluding balloon
payments) and interest on any Indebtedness owing by the Borrower (excluding any
non-recourse mortgage Indebtedness

<PAGE>

owing by the Borrower or any Subsidiary of the Borrower and Indebtedness
relating to the Term Loan), (ii) all scheduled payments of principal of
(excluding balloon payments) and interest on any Indebtedness owing by the
Guarantor and (iii) Dividends paid by the Guarantor.

                  "Consolidated GAAP Shareholders' Equity" shall mean the
consolidated shareholders equity of the Guarantor, as calculated in accordance
with GAAP.

                  "Consolidated Net Operating Cash Flow" shall mean, for any
Test Period, Net Operating Income (a) less (i) all scheduled payments of
principal of non-recourse mortgage Indebtedness owing by the Guarantor and/or
its Subsidiaries (excluding any balloon payments), (ii) all interest payments on
such non-recourse Indebtedness, (iii) Twelve Million Dollars ($12,000,000) of
normal recurring capital expenditures and (b) plus (i) net income (loss) before
taxes and corporate interest expense of the Land Group, (ii) net income (loss)
before taxes of the Lumber Trading Group, (iii) net income (loss) before taxes
and corporate interest expense (including, but not limited to, interest incurred
on Debt, subordinated debt or any other third party debt) of the Corporate
Activity Group, (iv) actual cash taxes paid on the Net Operating Income and the
income set forth in subsections (b)(i), (b)(ii) and (b)(iii) above, (v) non-cash
interest expense accrued but not currently payable up to a maximum of Five
Million Dollars ($5,000,000) with respect to Indebtedness owing by the Guarantor
and its Subsidiaries other than Indebtedness owing by the Guarantor and/or its
Subsidiaries to the government of the United States or any state or municipality
thereof or any agencies of any of the foregoing and (vi) non-cash interest
expense accrued but not currently payable with respect to Indebtedness by the
Guarantor and/or its Subsidiaries owing to the government of the United States
or any state or municipality thereof or any agencies of any of the foregoing.

                  "Contingent Obligation" shall mean, with respect to any Person
at the time of any determination, without duplication, any obligation,
contingent or otherwise, of such Person guaranteeing or having the economic
effect of guaranteeing any Indebtedness of any other Person in any manner,
whether directly or otherwise; provided, that the term "Contingent Obligation"
shall not include endorsements for collection or deposit, in each case in the
ordinary course of business. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determinable amount of the
Indebtedness in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonable anticipated liability in respect
thereof (assuming such Person is required to perform thereunder).

                  "Controlled Group" shall mean a controlled group of
corporations as defined in Section 1563 of the Internal Revenue Code of 1986, as
may be amended from time to time, of which Guarantor or any Subsidiary is a
part.

                  "Debt" shall mean, collectively, (a) all Indebtedness now
owing or hereafter incurred by the Borrower to the Agents and/or the Banks
arising under or in connection with the Agreement, whether pursuant to
commitment or otherwise, and including, without limitation, the principal amount
of all Loans made pursuant to the Agreement, all interest thereon determined as
provided in the Agreement, all fees provided to be paid by the Borrower to the
Banks and/or the Agents pursuant to the Agreement or any Related Writing and all
liabilities in respect of letters of credit issued by the Agent and/or any of
the Banks for the account of the Borrower (but not including Indebtedness held
by any Bank arising and outstanding under any


                                      -2-
<PAGE>

transaction or document referred to in Sections 8.04 (other than that referred
to in subclause (a) thereof), and/or 8.07 of the Agreement), (b) each renewal,
extension, consolidation or refinancing of any such Indebtedness in whole or in
part, and (c) all interest from time to time accruing on any of the foregoing
Indebtedness.

                  "Distributions" shall have the meaning set forth in Section
9.13(e) hereof.

                  "Dividends" shall include all dividends (in cash or otherwise)
paid, capital returned, and other distributions of any kind made on any share of
Capital Stock outstanding at the time.

                  "EBDT" shall mean net earnings from operations before
depreciation, amortization and deferred taxes on income and excludes provision
for decline in real estate, gain (loss) on disposition of properties and
extraordinary gains.

                  "Environmental Laws" means all provisions of law, statutes,
ordinances, rules, regulations, permits, licenses, judgments, writs,
injunctions, decrees, orders, awards and standards promulgated by the government
of the United States of America or by any state or municipality thereof or by
any court, agency, instrumentality, regulatory authority or commission of any of
the foregoing, now or hereafter in effect, and in each case, as amended,
concerning or relating to health, safety and protection of, or regulation of the
discharge of substances into, the environment.

                  "ERISA Net Worth" shall mean (a) as to any Subsidiary, the
excess of the net book value of such Subsidiary's assets (other than patents,
treasury stock, goodwill and similar intangibles but including unamortized
mortgage and lease costs) over all of its liabilities (other than liabilities to
any other Company), such excess being determined in accordance with GAAP applied
on a basis consistent with the Guarantor's present accounting procedures, and
(b) as to the Guarantor, the excess of the net book value (after deducting all
applicable reserves and deducting any value attributable to the re-appraisal or
write-up of any asset) of the Guarantor's assets (other than patents, good will,
treasury stock and similar intangibles but including unamortized mortgage and
lease costs) over all of its liabilities as determined on an accrued and
consolidated and consolidating basis and in accordance with GAAP not
inconsistent with the Guarantor's present accounting principles consistently
applied.

                  "Event of Default" shall have the meaning set forth in Section
10 hereof.

                  "Fiscal Quarterly Date" shall mean each of January 31, April
30, July 31 and October 31.

                  "GAAP" shall mean generally accepted accounting principles in
the United States of America, in effect from time to time.

                  "Hedge Agreement" shall mean any non-fully paid derivative,
such as interest rate swaps or collar agreements or other similar agreements or
arrangements designed to hedge the position of a Person with respect to interest
rates, excluding any such agreements as to which all obligations of such Person
are paid or payable within twelve (12) months of the date such agreement is
entered into by such Person.


                                      -3-
<PAGE>

                  "Indebtedness" shall mean, with respect to any Person at the
time of any determination, without duplication, all obligations of such Person
which in accordance with GAAP should be classified upon the balance sheet of
such Person as liabilities, but in any event including: (a) all obligations of
such Person for borrowed money, (b) all obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments, (c) all obligations of
such Person upon which interest charges are customarily paid or accrued, (d) all
written obligations of such Person to maintain working capital, equity capital
or other financial statement condition of another Person so as to enable such
other Person to pay its Indebtedness or otherwise to protect the holder of such
Indebtedness against loss in respect thereof, (e) all obligations of such Person
issued or assumed as the deferred purchase price of property or services, (f)
all obligations of others secured by any Lien on property owned or acquired by
such Person, whether or not the obligations secured thereby have been assumed,
(g) all capitalized lease obligations of such Person, (h) all obligations of
such Person in respect of Hedge Agreements, (i) all obligations of such Person,
actual or contingent, as an account party in respect of letters of credit or
bankers' acceptances, and, without duplication, all drafts drawn thereunder, and
(j) all obligations of any partnership or joint venture as to which such Person
is or may become personally liable, provided, that, Indebtedness shall not
include (i) any obligations incurred as a result of fraud, misappropriation,
misapplication and environmental indemnities, as are usual and customary in
commercial loan transactions, or (ii) trade payables, deferred revenue, taxes
and accrued expenses, in each case arising in the ordinary course of business
and that is due and payable less than twelve (12) months after the date such
debt was incurred.

                  "Indemnity Agreement" shall mean any indemnity agreement in
form and substance satisfactory to the Agents and the Banks, by and between the
Guarantor and a Surety, and as each such Indemnity Agreement may be amended,
restated or otherwise modified.

                  "Indenture" shall mean the indenture dated as of May 19, 2003,
between the Guarantor and The Bank of New York, as indenture trustee and
relating to the Senior Notes.

                  "Measured Credit Risk" shall mean the product of (i) the
notional amount of a Hedge Agreement entered into or guaranteed by the Guarantor
or entered into by Forest City Capital Corporation, in each case with any Person
other than a Bank that has a remaining time to maturity of greater than twelve
(12) months, times (ii) the number of years to maturity of such Hedge Agreement,
times (iii)1.25%.

                  "Net Earnings" shall mean the Guarantor's net earnings, as
determined separately for each fiscal year, after taxes, upon a consolidated
basis (after deducting minority interests) and in accordance with GAAP
consistently applied.

                  "Net Losses" shall mean the Guarantor's net losses, as
determined separately for each fiscal year, after taxes, upon a consolidated
basis (after deducting minority interests) in accordance with GAAP consistently
applied.

                  "Net Operating Income" shall mean for any relevant period, the
excess of the Borrower's revenues over the Borrower's operating expenses, in
each case as determined in accordance with the Pro Rata Consolidation Method.
For purposes of this definition, Net


                                      -4-
<PAGE>

Operating Income (i) shall not include any gains or losses from the sale of
income producing real properties, other than gains or losses obtained from the
sale of net outlot parcels to a maximum aggregate amount of Twenty Million
Dollars ($20,000,000) for the immediately preceding four consecutive quarters
and (ii) shall include adjustments for cash flow of properties pursuant to which
the Borrower is receiving a preferred return over and above its ownership
percentage in such properties.

                  "Non-Affiliate Construction Project" shall mean any real
property and all improvements to be constructed thereon (collectively, the
"Non-Affiliate Property") (i) with respect to which the Borrower or a Subsidiary
of the Borrower, as the case may be, (a) may make a Permitted Non-Affiliate
Loan, and (b) is the developer pursuant to an agreement with a Non-Affiliated
Entity as owner of the Non-Affiliate Property; and (ii) with respect to which
the Borrower or an Affiliate of the Borrower, as the case may be, holds an
irrevocable option from either the Non-Affiliated Entity or the parent of the
Non-Affiliated Entity to acquire, respectively, either (a) the Non-Affiliate
Property, or (b) all of the equity interests owned by the parent of the
Non-Affiliated Entity in and to such Non-Affiliated Entity.

                  "Non-Affiliated Entity" shall mean any Person that is not an
Affiliate of the Borrower and that is wholly-owned by another Person.

                  "Obligor" shall mean any Person or entity who, or any of whose
property is or shall be, obligated on the Debt or any part thereof in any manner
and includes, without limiting the generality of the foregoing, the Borrower,
the Guarantor and any co-maker, endorser, other guarantor of payment,
subordinating creditor, assignor, grantor of a security interest, pledgor,
mortgagor or hypothecator of property, if any.

                  "Payment Default" shall mean any failure by the Borrower or
the Guarantor to make payment of principal of, or interest on, any Note (as
defined in the Agreement) or this Guaranty, as applicable, or any other fees or
expenses provided hereunder or under the Agreement, when due and payable,
whether at maturity or by acceleration.

                  "Permitted Debt" shall have the meaning set forth in Section
9.10 hereof.

                  "Permitted Distributions" shall have the meaning set forth in
Section 9.13(e) hereof.

                  "Permitted Non-Affiliate Loan" shall mean a loan by the
Borrower or any Subsidiary of the Borrower to a Non-Affiliated Entity for the
purposes of (a) purchasing or otherwise acquiring a Non-Affiliate Property or
(b) paying construction costs, in each case, in connection with a Non-Affiliate
Construction Project.

                  "Person" shall mean an individual, a corporation, a limited
liability company, a partnership, an association, a trust or any other entity or
organization, including, without limitation, a governmental or political
subdivision or an agency or instrumentality thereof.

                  "Plan" shall mean any employee pension benefit plan subject to
Title IV of the Employee Retirement Income Security Act of 1974, as amended,
established or maintained


                                      -5-
<PAGE>

by the Guarantor, any Subsidiary, any member of the Controlled Group, or any
such Plan to which the Guarantor, any Subsidiary or any member of the Controlled
Group is required to contribute on behalf of its employees.

                  "Possible Default" shall mean an event or condition which,
with notice or lapse of time or both, would constitute an Event of Default
referred to in Section 10 hereof.

                  "Pro Rata Consolidation Method" shall mean the pro rata method
of consolidation as opposed to the full consolidation method of accounting.

                  "Receivable" shall mean a claim for moneys due or to become
due, whether classified as a contract right, account, chattel paper, instrument,
general intangible or otherwise.

                  "Related Writing" shall mean any Note, assignment, mortgage,
security agreement, guaranty agreement, Subordination Agreement, financial
statement, audit report, officer's certificate or other writing furnished by the
Borrower, the Guarantor or any of their respective officers to the Agents or the
Banks.

                  "Reportable Event" shall mean a reportable event as that term
is defined in Title IV of the Employee Retirement Income Security Act of 1974,
as amended, with respect to a Plan as to which the thirty (30) day notice
requirement has not been waived by the Pension Benefit Guaranty Corporation.

                  "Restricted Company" shall mean the Guarantor or a Restricted
Subsidiary.

                  "Restricted Subsidiary" shall mean any Subsidiary of the
Guarantor other than (a) the Borrower, and (b) any Subsidiary of the Borrower.

                  "Senior Notes" shall mean the 2003 Senior Notes and the 2004
Senior Notes.

                  "Subordination Agreement" shall mean any subordination
agreement in form and substance satisfactory to the Agents and the Banks entered
into by a Surety in favor of the Agents and the Banks, and as each such
Subordination Agreement may, from time to time, be amended, restated or
otherwise modified.

                  "Subsidiary" of any Person shall mean and include (a) any
corporation more than fifty percent (50%) of whose stock of any class or classes
having by the terms thereof ordinary voting power to elect a majority of the
directors of such corporation is at the time owned by such Person directly or
indirectly through Subsidiaries, (b) any partnership, limited liability company,
association (including business trusts) or other entity in which such Person
directly or indirectly through Subsidiaries, has more than a fifty percent (50%)
voting or equity interest at the time, and (c) any corporation, limited
liability company, partnership, association or other entity the accounts of
which are consolidated with those of its parent in the parent's consolidated
financial statements.


                                      -6-
<PAGE>

                  "Surety" means any surety or insurance company reasonably
acceptable to the Agents.

                  "Surety Bonds" means the bonds, undertakings and other like
obligations executed by a Surety for the Guarantor subject to an Indemnity
Agreement and a Subordination Agreement in a maximum aggregate principal amount
of $30,000,000 for all Sureties.

                  "Term Loan" means that certain Term Loan made from certain of
the Banks to the Borrower pursuant to the Original Credit Agreement.

                  "Test Period" shall mean each period of four consecutive
fiscal quarters of the Guarantor or the Borrower, as applicable, in each case
taken as one accounting period, ended after the Closing Date and commencing
April 30, 2004.

                  "Trading Loans" shall mean any loans that are now or hereafter
outstanding from Forest City Trading Group, Inc. (but not from any other lender,
whether or not such lender is a Subsidiary of the Guarantor) to the Guarantor.

                  "2003 Senior Notes" shall mean the senior notes of the
Guarantor issued on May 19, 2003, pursuant to the Indenture, in an original
aggregate principal amount of $300,000,000.

                  "2004 Senior Notes" shall mean the senior notes of the
Guarantor issued on February 10, 2004, pursuant to the Indenture, in an original
aggregate principal amount of up to $100,000,000.

                  All capitalized terms used herein but not herein defined that
are defined in the Agreement shall have the respective meanings ascribed to them
in the Agreement.

                  All financial covenants contained in this Guaranty shall be
measured on each Fiscal Quarterly Date.

Accounting Principles

                  Any accounting term not specifically defined in this Section 1
or elsewhere in this Guaranty, shall have the meaning ascribed thereto by GAAP
not inconsistent with the Guarantor's present accounting procedures, provided,
that, if the Guarantor notifies the Agent that the Guarantor requests an
amendment to any provision hereof to eliminate the effect of any change
occurring after the Closing Date in GAAP or in the application thereof on the
operation of such provision (or if the Agent notifies the Guarantor that the
Required Lenders request an amendment to any provision hereof for such purpose),
regardless of whether any such notice is given before or after such change in
GAAP or in the application thereof, then such provision shall be interpreted on
the basis of GAAP as in effect and applied immediately before such change shall
have become effective until such notice shall have been withdrawn or such
provision amended in accordance herewith.

                  Notwithstanding the foregoing, the financial statements
furnished to the Banks pursuant hereto shall be made and prepared in accordance
with GAAP consistently


                                      -7-
<PAGE>

applied throughout the periods involved (except as set forth in the notes
thereto or as otherwise disclosed in writing by the Guarantor to the Banks),
provided, that (a) all computations determining compliance with Sections 9.8 and
9.14, including definitions used therein, shall utilize accounting principles
based on the Pro Rata Consolidation Method, (b) all computations determining
compliance with Sections 9.8, 9.14 and 9.15, including definitions used therein,
shall exclude interest income received by the Borrower or any of its
Subsidiaries with respect to loans made by the Borrower or such Subsidiary
pursuant to Section 8.06(d) of the Agreement, unless such loans are funded with
the proceeds from Revolving Loans or the Senior Notes and (c) such financial
statements must also include a report (in the footnotes thereto or otherwise) of
the financial results of the Guarantor using accounting principles based on the
Pro Rata Consolidation Method.

                  2. ACKNOWLEDGMENTS, CONSIDERATION. The Guarantor desires that
the Agent and the Banks grant the Borrower the loan(s), credit and financial
accommodations provided for under the Agreement. The Agreement provides, on and
subject to certain conditions therein set forth, for Revolving Loans by the
Banks to the Borrower up to an aggregate maximum principal amount of Four
Hundred Fifty Million Dollars ($450,000,000). There exists and will hereafter
exist economic and business relationships between the Guarantor and the Borrower
which will be of benefit to the Guarantor. The Guarantor finds it to be in the
direct business and economic interest of the Guarantor that the Borrower obtain
the loans, credit and financial accommodations from the Agents and the Banks
provided for in the Agreement. The Guarantor understands that the Agents and the
Banks are willing to grant the loans, credit and financial accommodations to the
Borrower provided for in the Agreement only upon certain terms and conditions,
one of which is that the Guarantor unconditionally guarantee the payment of the
Debt and this instrument is being executed and delivered by the Guarantor to
satisfy that condition and in consideration of the Agents and the Banks entering
into the Agreement.

                  3. GUARANTY. The Guarantor hereby absolutely, irrevocably and
unconditionally guarantees (a) the punctual and full payment of all and every
portion of the Debt when due, by acceleration or otherwise, whether now owing or
hereafter arising, (b) the prompt observance and performance by the Borrower of
each and all of the Borrower's covenants, undertakings, obligations and
agreements set forth in the Agreement, the Notes and/or any other instruments
evidencing or pertaining thereto, and (c) the prompt payment of all expenses and
costs, including reasonable attorneys' fees, incurred by or for the account of
the Agents and/or the Banks in connection with any action to enforce payment or
collection of the Debt from the Borrower and/or the Guarantor or to prepare any
amendments, restatements or modifications of the Agreement, the Notes and/or
this Guaranty. If the Debt or any part thereof shall not be paid in full
punctually when due and payable, the Agents and/or the Banks in each case shall
have the right to proceed directly against the Guarantor under this Guaranty
regardless of whether or not the Agents and/or the Banks shall have theretofore
proceeded or shall then be proceeding against the Borrower or any other Obligor
or Collateral, if any, or any of the foregoing, it being understood that the
Agents and/or the Banks in their sole discretion may proceed or not proceed
against the Borrower, the Obligors and/or any Collateral and may exercise or not
exercise each right, power or privilege that the Agents and/or the Banks may at
any time have, either simultaneously or separately and, in any event, at such
time or times and as often and in such order as the Agents and/or the Banks in
their sole discretion, may from time to time deem expedient, all without
affecting the obligations of the Guarantor hereunder or the right of the


                                      -8-
<PAGE>

Agents and/or the Banks to demand and/or enforce performance by the Guarantor of
the Guarantor's obligations hereunder.

                  4. REINSTATEMENT. This Guaranty shall continue to be effective
or be reinstated, as the case may be, if any amount paid by or on behalf of the
Borrower to the Agents or the Banks on or in respect of the Debt is rescinded,
restored or returned in connection with the insolvency, bankruptcy, dissolution,
liquidation or reorganization of the Borrower or any other Obligor, or as a
result of the appointment of a receiver, intervenor or conservator of, or
trustee or similar officer for, the Borrower or any other Obligor or any part of
the property of the Borrower or any other Obligor, or otherwise, all as though
such payment had not been made.

                  5. WAIVERS. The Guarantor waives any and all contractual,
legal and/or equitable rights of subrogation, contribution, exoneration,
indemnity and/or reimbursement from or against the Borrower or any Obligor with
respect to the Debt and/or any payments made by the Guarantor on account of this
Guaranty.

                  6. ADDITIONAL AGREEMENTS. Regardless of the duration of time,
regardless of whether the Borrower may from time to time cease to be indebted to
the Banks and irrespective of any act, omission or course of dealing whatever on
the part of the Agents and/or the Banks, the Guarantor's liabilities and other
obligations under this Guaranty shall remain in full force and effect until the
full and final payment of all of the Debt. Without limiting the generality of
the foregoing:

                  6.1. The obligations of the Guarantor hereunder shall not be
released, discharged or in any way affected, nor shall the Guarantor have any
rights or recourse against the Agents or the Banks by reason of (a) any action
the Agents or the Banks may take or omit to take, or (b) any defense raised or
asserted by the Borrower against enforcement of the Agreement or the Notes or
any challenge to the sufficiency or enforceability of the Agreement, any of the
Notes or this Guaranty, or (c) any act or thing that might otherwise operate as
a legal or equitable discharge of a surety, as to which the Guarantor hereby
expressly waives any and all defenses available to a surety except irrevocable
payment in full of the Debt.

                  6.2. The obligations of the Guarantor under this Guaranty
shall be satisfied strictly in accordance with the terms of this Guaranty, under
all circumstances whatsoever, including, without limitation, the existence of
any claim, setoff, defense or right which the Guarantor or the Borrower may have
at any time against the Agents or the Banks or any other Person or entity,
whether in connection with this Guaranty, the Agreement, the Notes or the
transactions contemplated hereby or any unrelated transaction.

                  6.3. The Banks shall at no time be under any duty to the
Guarantor to grant any loans, credit or financial accommodation to the Borrower,
irrespective of any duty or commitment of the Banks to the Borrower, or to
follow or direct the application of the proceeds of any such loans, credit or
financial accommodation.

                  6.4. The Guarantor waives (a) notice of the granting of any
loan to the Borrower or the incurring of any other Indebtedness, including, but
not limited to the creation of the Debt by the Borrower or the terms and
conditions thereof, (b) presentment, notice of


                                      -9-
<PAGE>

nonpayment, demand for payment, protest, notice of protest and notice of
dishonor of the Notes or any other Indebtedness incurred by the Borrower to the
Banks, (c) notice of any indulgence granted to any Obligor, (d) notice of the
Banks' acceptance of this Guaranty, and (e) any other notice to which the
Guarantor might, but for the within waiver, be entitled.

                  6.5. The Agents and/or the Banks in their sole discretion may,
without prejudice to their rights under this Guaranty, at any time or times (a)
grant the Borrower whatever loans, credit or financial accommodations that the
Banks, or any thereof, may from time to time deem advisable, even if the
Borrower might be in default and even if those loans, credit or financial
accommodations might not constitute Debt the payment of which is guaranteed
hereunder, (b) assent to any renewal, extension, consolidation or refinancing of
the Debt or any part thereof, (c) forbear from demanding security, if the Agents
and/or the Banks shall have the right to do so, (d) release any Obligor or
Collateral or assent to any exchange of Collateral, if any, irrespective of the
consideration, if any, received therefor, (e) grant any waiver or consent or
forbear from exercising any right, power or privilege that the Agents and/or the
Banks may have or acquire, (f) assent to any amendment, deletion, addition,
supplement or other modification in, to or of any writing evidencing or securing
any Debt or pursuant to which any Debt is created, (g) grant any other
indulgence to any Obligor, (h) accept any Collateral for or other Obligors upon
the Debt or any part thereof, or (i) fail, neglect or omit in any way to realize
upon any Collateral or to protect the Debt or any part thereof or any Collateral
therefor.

                  6.6. The Guarantor's liabilities and other obligations under
this Guaranty shall survive any merger, consolidation or dissolution of the
Guarantor.

                  6.7. The Guarantor's liabilities and other obligations under
this Guaranty shall be absolute and unconditional irrespective of any lack of
validity or enforceability of any agreement, instrument or document evidencing
the Debt or related thereto, or any other defense available to the Guarantor in
respect of this Guaranty.

                  7. REPRESENTATIONS AND WARRANTIES. The Guarantor represents
and warrants that (a) it is a duly organized and validly existing corporation
under the laws of the State of Ohio, (b) the execution, delivery and performance
of this Guaranty have been duly authorized by all necessary corporate action,
(c) there is no prohibition in either its Articles of Incorporation, Code of
Regulations or in any agreement, instrument, judgment, decree or order to which
it is a party that in any way restricts or prohibits the execution, delivery and
performance of this Guaranty in any respect, (d) this Guaranty has been duly
executed and delivered by the Guarantor and is a valid and binding obligation of
the Guarantor enforceable against the Guarantor in accordance with its terms,
and (e) as of October 31, 2003, there are 36,000,000 shares authorized of Class
B Common Stock of the Guarantor of which 13,716,192 shares are issued and
outstanding.

                  The Guarantor further represents and warrants that this
Guaranty is made in furtherance of the purposes for which the Guarantor was
incorporated and is necessary to promote and further the business of the
Guarantor and that the assumption by the Guarantor of its obligations hereunder
will result in direct financial benefits to the Guarantor.


                                      -10-
<PAGE>

                  This Guaranty is not made in connection with any consumer loan
or consumer transaction.

                  The Guarantor further represents and warrants that (a) the
Guarantor has received consideration which is the reasonably equivalent value of
the obligations and liabilities that the Guarantor has incurred to the Agents
and/or the Banks, (b) the Guarantor is not insolvent as defined in any
applicable state or federal statute, nor will the Guarantor be rendered
insolvent by the execution and delivery of this Guaranty to the Agents and the
Banks, (c) the Guarantor is not engaged or about to engage in any business or
transaction for which the assets retained by the Guarantor shall be an
unreasonably small capital, taking into consideration the obligations to the
Agents and the Banks incurred hereunder, and (d) the Guarantor does not intend
to, nor does the Guarantor believe, that the Guarantor will incur debts beyond
the Guarantor's ability to pay as they become due.

                  The Guarantor further represents and warrants that the
Guarantor has provided to the Agent three copies of all promissory notes or
other writings evidencing any Trading Loans outstanding on the date hereof and
that the Guarantor has no other Indebtedness outstanding from any Subsidiary to
the Guarantor.

                  8. NOTICES. The Agents and/or the Banks shall be deemed to
have knowledge or to have received notice of any event, condition or thing only
if the Agents and/or the Banks shall have received written notice thereof as
provided in the Agreement. A written notice shall be deemed to have been duly
given to the Guarantor whenever a writing to that effect shall have been sent by
registered or certified mail to the Guarantor at the address set forth opposite
the Guarantor's signature below (or to such other address of the Guarantor as
the Guarantor may hereafter furnish to the Banks in writing for such purpose),
but no other method of giving notice to or making a request of the Guarantor is
hereby precluded.

                  9. COVENANTS. The Guarantor hereby agrees to perform and
observe and to cause each Subsidiary to perform and observe, all of the
following covenants and agreements:

                  9.1. INSURANCE. Each Company will:

                  (a) insure itself and all of its insurable properties to such
      extent, by such insurers and against such hazards and liabilities as is
      generally done by businesses similarly situated, it being understood that
      the Guarantor has obtained a fidelity bond for such of its employees as
      handle funds belonging to the Borrower or the Guarantor,

                  (b) give the Agent prompt written notice of any material
      reduction or adverse change in that Company's insurance coverage, and

                  (c) forthwith upon any Bank's or the Agent's written request,
      furnish to each Bank and the Agent such information in writing about that
      Company's insurance as any Bank or the Agent, as applicable, may from time
      to time reasonably request.


                                      -11-
<PAGE>

                  9.2. MONEY OBLIGATIONS. Each Company will pay in full:

                  (a) prior in each case to the date when penalties would
      attach, all taxes, assessments and governmental charges and levies (except
      only those so long as and, to the extent that, the same shall be contested
      in good faith by appropriate and timely proceedings diligently pursued and
      taxes and assessments on inconsequential parcels of vacant land, the
      nonpayment of which does not materially adversely affect the financial
      condition of the Guarantor) for which it may be or become liable or to
      which any or all of its properties may be or become subject,

                  (b) all of its wage obligations to its employees in compliance
      with the Fair Labor Standards Act (29 U.S.C. Section 206-207) or any
      comparable provisions, and

                  (c) all of its other obligations calling for the payment of
      money (except only those so long as and to the extent that the same shall
      be contested in good faith by appropriate and timely proceedings
      diligently pursued) before such payment becomes overdue; provided that,
      notwithstanding the foregoing, the Guarantor shall not make any payment on
      account of any of the Senior Notes in the event of and during the
      continuance of any Payment Default under the Agreement or this Guaranty.

                  9.3. RECORDS. Each Company will:

                  (a) at all times maintain true and complete records and books
      of account and, without limiting the generality of the foregoing, maintain
      appropriate reserves for possible losses and liabilities, all in
      accordance with generally accepted accounting principles applied on a
      basis not inconsistent with its present accounting procedures, and

                  (b) at all reasonable times permit each Bank to examine that
      Company's books and records and to make excerpts therefrom and transcripts
      thereof.

                  9.4. FRANCHISES. Each Company will preserve and maintain at
all times its corporate existence, rights and franchises; provided, that this
Section shall not apply to (a) any merger of a Subsidiary into the Guarantor or
into another Subsidiary, (b) any consolidation of a Subsidiary with another
Subsidiary, or (c) any dissolution of any Subsidiary, except in each case where
the Subsidiary is the Borrower.

                  9.5. NOTICE. The Guarantor will cause its Chief Financial
Officer, or in his or her absence another officer designated by the Chief
Financial Officer, to promptly notify the Banks whenever (a) any Event of
Default or Possible Default may occur hereunder (including, without limitation,
any default under any of the Senior Notes, the Indenture or any other document
relating thereto (after giving effect to any applicable grace period)) or any
representation or warranty made herein may for any reason cease in any material
respect to be true and complete, and/or (b) any Restricted Subsidiary shall (i)
be in default of any material (either with respect to the Borrower or the
Guarantor) obligation for payment of borrowed money, or, to the knowledge of the
Guarantor, any material obligations in respect of guarantees, taxes and/or
Indebtedness for goods or services purchased by, or other contractual
obligations of, such Subsidiary, and/or (ii) not, to the knowledge of the
Guarantor, be in compliance with any law, order, rule, judgment, ordinance,
regulation, license, franchise, lease or other agreement that


                                      -12-
<PAGE>

has or could reasonably be expected to have a material adverse effect on the
business, operations, property or financial condition of the Subsidiary, and/or
(c) the Guarantor and/or the Subsidiary shall have received notice, or have
knowledge, of any actual, pending or threatened claim, notice, litigation,
citation, proceeding or demand relating to any matter(s) described in subclauses
(b)(i) and (b)(ii) of this Section 9.5. Further, the Guarantor shall notify the
Banks not less than thirty (30) days in advance of entering into any proposed
amendment or modification of any of the Senior Notes or the Indenture, whether
or not the Guarantor believes that the consent of the Required Banks is needed
therefor pursuant to Section 9.10(h)(iii) of this Guaranty.

                  9.6. ERISA COMPLIANCE. No Company will incur any material
accumulated funding deficiency within the meaning of the Employee Retirement
Income Security Act of 1974, as amended from time to time, and the regulations
thereunder or any material liability to the Pension Benefit Guaranty
Corporation, established thereunder in connection with any Plan. Each Company
will furnish (i) as soon as possible and in any event within thirty (30) days
after such Company knows or has reason to know that any Reportable Event with
respect to any Plan has occurred, a statement of the Chief Financial Officer of
such Company setting forth details as to such Reportable Event and the action
which such Company proposes to take with respect thereto, together with a copy
of the notice of such Reportable Event given to the Pension Benefit Guaranty
Corporation if a copy of such notice is available to such Company, (ii) promptly
after the filing thereof with the United States Secretary of Labor or the
Pension Benefit Guaranty Corporation, copies of each annual report with respect
to each Plan established or maintained by such Company for each plan year,
including (x) where required by law, a statement of assets and liabilities of
such Plan as of the end of such plan year and statements of changes in fund
balance and in financial position, or a statement of changes in net assets
available for plan benefits, for such plan year, certified by an independent
public accountant satisfactory to the Banks, and (y) an actuarial statement of
such Plan applicable to such plan year, certified by an enrolled actuary of
recognized standing acceptable to the Banks, and (iii) promptly after receipt
thereof a copy of any notice such Company, any Subsidiary or any member of the
Controlled Group may receive from the Pension Benefit Guaranty Corporation or
the Internal Revenue Service with respect to any Plan administered by such
Company; provided, that this latter clause shall not apply to notices of general
application promulgated by the Pension Benefit Guaranty Corporation or the
Internal Revenue Service. As used in this Section 9.6, "material" means the
measure of a matter of significance which shall be determined as being an amount
equal to five percent (5%) of each Company's ERISA Net Worth.

                  9.7. FINANCIAL STATEMENTS. The Guarantor will furnish to each
Bank:

                  (a) within forty-five (45) days (or fifty (50) days so long as
      the Guarantor will not be reporting an Event of Default on such Form 10-Q
      report) after the end of each quarter-annual period of each fiscal year of
      the Guarantor, a copy of the Guarantor's Form 10-Q quarterly report as
      filed by the Guarantor with the Securities and Exchange Commission,

                  (b) within forty-five (45) days (or fifty (50) days so long as
      the Guarantor shall not have reported an Event of Default to the
      Securities and Exchange Commission during such fiscal period nor on its
      most recent filing with the Securities and Exchange


                                      -13-
<PAGE>

      Commission) after the end of each of the first three (3) quarter-annual
      fiscal periods of each fiscal year of the Guarantor, an unaudited
      consolidated and consolidating balance sheet of the Guarantor as at the
      end of that period and an unaudited consolidated and consolidating
      statement of income of the Guarantor for the Guarantor's current fiscal
      year to date, all prepared in form and detail in accordance with GAAP,
      consistently applied, or the Pro Rata Consolidation Method, as applicable,
      and certified by a Senior Officer of the Guarantor, subject to changes
      resulting from quarter-end adjustments, together with a certificate of a
      Senior Officer of the Guarantor (i) specifying the nature and period of
      existence of each Event of Default and/or Possible Default, if any, and
      the action taken, being taken or proposed to be taken by the Guarantor in
      respect thereof or if none, so stating, and (ii) certifying that the
      representations and warranties of the Guarantor set forth herein are true
      and correct as of the date of such certificate, or, if not, all respects
      in which they are not, and (iii) a covenant compliance worksheet in the
      form and substance of Schedule 9.7(b) hereof completed as of the end of
      such fiscal quarterly period,

                  (c) within ninety (90) days (or ninety-five (95) days so long
      as the Guarantor shall not have reported an Event of Default to the
      Securities and Exchange Commission during such fiscal period nor on its
      most recent filing with the Securities and Exchange Commission) after the
      end of each fiscal year of the Guarantor, an annual report on Form 10-K as
      filed by the Guarantor with the Securities and Exchange Commission,
      including the complete audited consolidated balance sheets and statements
      of income of the Guarantor for that year certified by an independent
      public accountant satisfactory to the Banks, and an unaudited
      consolidating balance sheet and statement of income of the Parent for the
      current fiscal year, each in form and detail satisfactory to the Banks,
      and prepared in accordance with GAAP, consistently applied, or the Pro
      Rata Consolidation Method, as applicable, together with (i) a report of
      the independent certified public accountant with an opinion that is not
      qualified as to the scope of the audit or as to the status of the
      Guarantor or the Borrower as a going concern, (ii) a certificate of the
      Senior Officer of the Guarantor (X) specifying the nature and period of
      existence of each Event of Default and/or Possible Default, if any, and
      the action taken, being taken or proposed to be taken by the Guarantor in
      respect thereof or if none, so stating, and (Y) certifying that the
      representations and warranties of the Guarantor set forth herein are true
      and correct as of the date of such certificate, or, if not, all respects
      in which they are not, and (iii) a fully completed covenant compliance
      worksheet in the form and substance of Schedule 9.7(b) hereof relating to
      such fiscal year duly certified by the Guarantor's accountants,

                  (d) concurrently with furnishing any quarterly financial
      statement or audit report pursuant to this Section 9.7, a certificate by
      Charles A. Ratner, Albert Ratner, Samuel H. Miller or Thomas G. Smith
      stating whether any Company has made any guaranty or incurred any
      Indebtedness referred to in Section 9.10(d) or Section 9.12(g) hereof and,
      if so, the details thereof,

                  (e) as soon as available, copies of all notices, reports,
      proxy statements and other similar documents sent by the Guarantor to its
      shareholders, to the holders of any of its debentures or bonds or the
      trustee of any indenture securing the same or pursuant to which they have
      been issued, to any securities exchange or to the Securities


                                      -14-
<PAGE>

      Exchange Commission or any similar federal agency having regulatory
      jurisdiction over the issuance of the Guarantor's securities,

                  (f) within forty-five (45) days after the end of each fiscal
      quarter of the Guarantor, a schedule setting forth the aggregate Measured
      Credit Risk as of the last day of such fiscal quarter, along with the
      remaining available Measured Credit Risk permitted by Section 9.10(j),

                  (g) within one hundred twenty (120) days after the end of each
      fiscal year of the Guarantor, a calculation of the consolidated leverage
      of the Guarantor as of the last day of such fiscal year, with such details
      and explanations as may be reasonably required by the Banks, and

                  (h) forthwith upon any Bank's written request such other
      information of any Company's financial condition and business, including,
      but not limited to any management letters of accountants addressed to the
      Guarantor or the Borrower.

                  9.8. EBDT. The Guarantor will not suffer or permit its EBDT,
as of any Fiscal Quarterly Date falling within the periods set forth below, for
the Test Period ending on such Fiscal Quarterly Date, to be less than the amount
set forth below for the respective periods set forth below:

<TABLE>
<CAPTION>
           Period                                                  EBDT
           ------                                                  ----
<S>                                                           <C>
      January 31, 2004                                        $190,000,000

      February 1, 2004 through January 31, 2005               $200,000,000

      February 1, 2005 through January 31, 2006               $210,000,000

      February 1, 2006 and thereafter                         $220,000,000
</TABLE>

                  9.9. COMBINATIONS, BULK TRANSFERS. (a) No Restricted Company
will be a party to any consolidation or merger or lease, sell or otherwise
transfer all or any substantial part of its assets or sell, pledge, hypothecate
or transfer its stock or other ownership interests in any Subsidiary; provided,
that this Section 9.9 shall not apply to any transfer (as opposed to a pledge)
effected in the normal course of business on commercially reasonable terms and
provided, further, that a Restricted Company shall only be permitted to pledge
its stock or other ownership interests in any of its Subsidiaries that is a
single asset or special purpose entity (each, a "Pledged Subsidiary") to secure
the following:

                        (i) additional or mezzanine Indebtedness incurred with
                  respect to a project encumbered by a first mortgage at the
                  time such additional or mezzanine Indebtedness is incurred, so
                  long as such additional or mezzanine Indebtedness is permitted
                  under Section 9.10 of this Guaranty provided, that the sum of
                  the then existing Indebtedness with respect to such project
                  plus such additional or mezzanine Indebtedness does not


                                      -15-
<PAGE>

                  exceed eighty percent (80%) of the appraised value of the
                  project at the time such additional or mezzanine Indebtedness
                  is incurred; or

                        (ii) primary Indebtedness (or the re-financing thereof)
                  incurred solely for the purpose of acquiring real property or
                  for construction or redevelopment purposes; provided, that
                  such primary Indebtedness (or the re-financing thereof) does
                  not exceed one hundred percent (100%) of the appraised value
                  of the acquired property at the time of such financing or
                  re-financing, as applicable.

                  (b) In addition to the foregoing, (i) such pledges of stock or
      other ownership interests in a Pledged Subsidiary given to secure
      Indebtedness described in Section 9.9(a)(i) or Section 9.9(b)(ii)(Y) may
      be made with respect to no more than fifteen (15) individual properties,
      collectively with the Borrower, all its Subsidiaries and all Restricted
      Companies at any one time, exclusive of the properties set forth on
      Schedule 9.9A of this Guaranty, and (ii) the aggregate of all such (X)
      additional or mezzanine Indebtedness described in Section 9.9(a)(i) above
      and (Y) primary Indebtedness described in Section 9.9(a)(ii) above in
      excess of eighty percent (80%) of the appraised value of the property, in
      each case for which such a pledge may be provided by a Restricted Company,
      shall not exceed Two Hundred Million Dollars ($200,000,000) in the
      aggregate for all pledges provided by the Restricted Companies, the
      Borrower and its Subsidiaries, taken together.

                  (c) The Guarantor will deliver to the Agents and the Banks an
      updated schedule, in the form of Schedule 9.9 attached hereto, listing all
      of the properties as to which a pledge of stock or other ownership
      interests has been provided to a lender in accordance with Section 9.9(b),
      within forty-five (45) days after each Fiscal Quarterly Date.

                  9.10. BORROWINGS. No Restricted Company will create, assume or
suffer to exist any Indebtedness of any kind including, but not limited to,
leases required to be capitalized under Financial Accounting Standards Board
Standard No. 13 or any reimbursement obligations or other liabilities with
respect to letters of credit issued for any Restricted Company's account;
provided, that this Section 9.10 shall not apply to any of the following
(collectively, "Permitted Debt"):

                  (a) any loan obtained by Forest City Trading Group, Inc.,
      formerly known as American International Forest Products, Inc. (or any of
      its wholly-owned Subsidiaries) from any lender other than the Companies,

                  (b) any loan obtained from the Guarantor by any Restricted
      Subsidiary and, in the ordinary course of business by Forest City Trading
      Group, Inc. (or any of its wholly-owned Subsidiaries),

                  (c) any real estate loan heretofore or hereafter obtained or
      guaranteed by the Guarantor for the purpose of financing any building to
      be used only for the business


                                      -16-
<PAGE>

      of Guarantor and its Subsidiaries, provided, that no such loan shall
      exceed eighty percent (80%) of the lender's appraisal of the real estate
      being financed,

                  (d) any loan or letter of credit that is obtained or
      guaranteed by the Guarantor; provided, that the Guarantor's aggregate
      personal liability in respect of all such loans (other than any loan
      obtained by the Guarantor and permitted by any other clause of this
      Section 9.10) and letters of credit and in respect of all guaranteed loans
      referred to in clause (f) of Section 9.12 hereof, does not then exceed and
      after incurring such loan or letter of credit or the guarantee thereof in
      question would not exceed, Ten Million Dollars ($10,000,000),

                  (e) leases required to be capitalized under Financial
      Accounting Standards Board Standard No. 13 in the aggregate amount for all
      Restricted Subsidiaries of Three Million Dollars ($3,000,000),

                  (f) any secured Indebtedness of a Restricted Company created
      in the course of purchasing or developing real estate or financing
      construction (or any refinancings thereof) or other improvements thereon
      or purchasing furniture, fixtures or other equipment therefor or any other
      Indebtedness of any Restricted Company or any refinancings thereof;
      provided, that no Restricted Company (other than a Restricted Company
      whose sole assets consist of contiguous parcels of land which are being
      purchased or developed with such financing, the improvements, if any,
      thereon, furniture, fixtures and other equipment used in connection
      therewith, receivables arising from tenants in connection therewith and
      the proceeds of such receivables and other property directly obtained from
      the ownership of such assets) shall have any personal liability for such
      Indebtedness, the creditors' recourse being solely to the property being
      pledged as collateral for such Indebtedness and the income therefrom,

                  (g) any Trading Loans, provided, that each of the following
      conditions is satisfied as to each of such Trading Loans:

                        (i) the aggregate principal amount of all the Trading
                  Loans may not exceed Ten Million Dollars ($10,000,000);

                        (ii) no interest shall accrue or be payable with respect
                  to any Trading Loan;

                        (iii) there shall be no scheduled principal payments
                  prior to the maturity date of any Trading Loan, as any
                  promissory notes evidencing such Trading Loans may be extended
                  from time to time; no principal payments shall be made on any
                  Trading Loan at any time that a Possible Default or Event of
                  Default exists under the Guaranty or the Agreement, or at any
                  time that the Agent has determined, in its sole discretion,
                  that there has been a material adverse change in the financial
                  condition of the Guarantor; and the Trading Loans, either
                  individually or in the aggregate, shall not be revolving loans
                  and, if any principal payments are made on any Trading Loan,
                  the Ten Million Dollars ($10,000,000) maximum


                                      -17-
<PAGE>

                  amount of permissible Trading Loans set forth above shall
                  automatically and irrevocably decline by like amount upon such
                  payment;

                        (iv) each Trading Loan shall be expressly subordinate in
                  right of payment to the prior payment in full of the
                  Indebtedness under the Guaranty and the Agreement, whether
                  such Indebtedness arises due to a Term Loan, a Revolving Loan
                  or otherwise;

                        (v) an event of default as to any Trading Loan(s) will
                  automatically constitute an Event of Default under the
                  Agreement, the Notes and the Guaranty; and

                        (vi) each Trading Loan shall be evidenced by a written
                  promissory note, including the terms set forth above in
                  clauses (i) through (v) and shall otherwise be in form and
                  substance approved in advance by the Agent, executed by the
                  Guarantor and Forest City Trading Group, Inc. and, in the case
                  of any Trading Loan(s) on or after the date of the date
                  hereof, executed by such parties not later than the date of
                  the first disbursement of such Trading Loan, a copy of which
                  note(s) shall be provided within ten (10) days after
                  execution,

                  (h) any Indebtedness or obligations of the Guarantor under the
      Senior Notes; provided, that,

                        (i) none of the Senior Notes nor the Indenture may
                  provide that an Event of Default under the Agreement or this
                  Guaranty constitutes a default under any of the Senior Notes
                  or the Indenture, except in the case of an Event of Default
                  that constitutes the failure to pay the principal of any Debt
                  when due and payable after the expiration of any applicable
                  grace period with respect thereto and shall have resulted in
                  the acceleration of such Debt or constitutes the failure to
                  pay any portion of the principal of the Debt when due and
                  payable after acceleration or maturity;

                        (ii) the Indebtedness represented by the Senior Notes
                  shall be unsecured, pari passu with the Guarantor's
                  obligations under this Guaranty and structurally subordinate
                  to the Borrower's Obligations to the Banks under the
                  Agreement;

                        (iii) none of the Senior Notes nor the Indenture shall
                  be amended or modified without the prior written consent of
                  the Required Banks, including, without limitation, (A) to
                  allow the maturity of any of the Senior Notes to be less than
                  ten (10) years from the respective date of issue, (B) to
                  provide for payment of interest under any of the Senior Notes
                  more frequently than quarterly, or (C) to modify the
                  redemption provisions contained therein, including adding
                  additional redemption provisions, other than amendments or
                  modifications that do not adversely


                                      -18-
<PAGE>

                  affect the Agreement or this Guaranty or their relationship to
                  any of the Senior Notes or the Indenture,

                        (iv) the outstanding and unredeemed principal amount of
                  the Senior Notes shall not, at any time, exceed Four Hundred
                  Million Dollars ($400,000,000) in the aggregate; and

                        (v) the terms and conditions of the 2003 Senior Notes,
                  the 2004 Senior Notes and the Indenture shall be satisfactory,
                  in form and substance, to the Agents and the Banks,

                  (i) any Indebtedness or obligations of the Guarantor under the
      Surety Bonds or the Indemnity Agreement to a maximum aggregate principal
      amount of $30,000,000.00 minus the aggregate stated amount of all letters
      of credit then outstanding for the account of the Borrower under the
      Agreement in excess of $10,000,000; provided, such Indebtedness is fully
      subordinated to the obligations of the Guarantor under this Guaranty as
      set forth in the Subordination Agreement,

                  (j) any Indebtedness of the Guarantor or Forest City Capital
      Corporation under any Hedge Agreement relating to Indebtedness otherwise
      permitted under this Guaranty, provided, that, any Hedge Agreement
      proposed to be entered into or guaranteed by the Guarantor or entered into
      by Forest City Capital Corporation, as applicable, in each case with a
      Person that is not a Bank that results in an aggregate Measured Credit
      Risk for all Hedge Agreements entered into with Persons other than a Bank,
      in excess of $33,500,000, shall require the prior written consent of the
      Required Banks (such written consent to be delivered by each consenting
      Bank to the Agent not more than three (3) Business Days after the request
      for such consent has been delivered by the Guarantor to the Agent,
      provided, that, each Bank that does not deliver such written consent
      within such three (3) Business Day period shall be deemed to have denied
      the request for such Hedge Agreement).

                  (k) any Indebtedness of the Guarantor with respect to deferred
      taxes that are due and payable in excess of twelve (12) months from the
      date of the incurrence of such tax liability,

                  (l) any Indebtedness permitted by Section 9.12(g) hereof, or

                  (m) any Indebtedness of the Guarantor permitted by Section
      9.13(d) hereof that replaces the Indebtedness evidenced by the Senior
      Notes.

                  9.11. LIENS. No Restricted Company will:

                  (a) sell or otherwise transfer any Receivables, including, but
      not limited to, any mortgages held by the Guarantor or any of its
      Subsidiaries, other than in the ordinary course of business,

                  (b) acquire any property subject to any land contract,
      conditional sale contract or other title retention contract, or


                                      -19-
<PAGE>

                  (c) suffer or permit any property now owned or hereafter
      acquired by it to be or become encumbered by any mortgage, security
      interest, financing statement, encumbrance or Lien of any kind or nature;

provided, that this Section 9.11 shall not apply to:

                  (i) any Lien for a tax, assessment or other governmental
      charge or levy so long as the payment thereof is not required by Section
      9.2(a) hereof,

                  (ii) any Lien securing only workmen's compensation,
      unemployment insurance or similar obligations,

                  (iii) any mechanic's, warehousemen's, carrier's or similar
      common law or statutory Lien incurred in the normal course of business,

                  (iv) any mortgage, security interest or other Lien encumbering
      property of any Restricted Subsidiary for the purpose of securing any
      Indebtedness owing by only that Subsidiary,

                  (v) any mortgage, security interest or other Lien encumbering
      property of the Guarantor and securing any Indebtedness or liability of
      the Guarantor permitted by clause (c) of Section 9.10 or by Section 9.12
      hereof,

                  (vi) any Lien permitted by Section 8.15 of the Agreement,

                  (vii) any transfer made in the ordinary course of business by
      Forest City Trading Group, Inc. (or any of its wholly-owned Subsidiaries),
      or

                  (viii) any financing statement perfecting a security interest
      permitted by this Section 9.11.

                  9.12. GUARANTEES. No Restricted Company will be or become a
guarantor of any kind; provided, that this Section 9.12 shall not apply to:

                  (a) any endorsement of a check or other medium of payment for
      deposit or collection through normal banking channels or any similar
      transaction in the normal course of business,

                  (b) any indemnity or guaranty of a surety bond for the
      performance by a customer of a Restricted Company of the customer's
      obligations under a land development contract,

                  (c) any guarantee by the Guarantor of a real estate loan
      permitted by clause (c) of Section 9.10,

                  (d) any Completion Guaranty with respect to a real estate
      building project, if the Guarantor or any Company is the developer of the
      project or has a property interest in the project (including, but not
      limited to, a Non-Affiliate Construction Project),


                                      -20-
<PAGE>

                  (e) the guarantee by the Guarantor set forth in Section 3
      hereof,

                  (f) any other guarantee by the Guarantor, provided, that the
      Guarantor's aggregate personal liability in respect of all of such other
      guarantees and all Indebtedness described in subsection (a) of the
      definition of Indebtedness (other than any loan permitted by clauses (a)
      through (c), inclusive, of Section 9.10 hereof) does not exceed, and after
      making the guarantee in question would not exceed, Ten Million Dollars
      ($10,000,000),

                  (g) any unsecured guarantee by the Guarantor or any Restricted
      Subsidiary of the equity investment or performance of a Subsidiary (other
      than any Indebtedness of such Subsidiary incurred for borrowed money) in
      connection with a real estate project in favor of a partner or member, or
      a partnership or limited liability company in which such Subsidiary is a
      general partner or a member, as applicable, when the Guarantor or such
      Restricted Subsidiary, as the case may be, deems it to be in its best
      interest not to be a partner, a member, or have a direct interest in the
      partnership or limited liability company, as applicable,

                  (h) the guarantee by the Guarantor of the obligations of
      Franklin Town Towers Associates located in Philadelphia, Pennsylvania,
      with respect to Museum Towers, in the original principal amount of Twenty
      Million Four Hundred Thousand Dollars ($20,400,000), provided, that such
      obligations shall not be amended, restated or otherwise modified without
      the prior written consent of the Banks,

                  (i) any guarantee or indemnity by the Guarantor or any
      Restricted Subsidiary for fraud, misappropriation, misapplication or
      environmental problems, as are usual and customary in commercial mortgage
      loan transactions entered into by the Guarantor and/or such Restricted
      Subsidiary, provided, that such a guarantee or indemnity may be given by
      the Guarantor or a Restricted Subsidiary, but not both (unless such
      Restricted Subsidiary is also the borrower in the particular commercial
      mortgage loan transaction), in connection with any particular commercial
      mortgage loan transaction,

                  (j) subject to Section 9.10(j) hereof, any guarantee by the
      Guarantor of an unsecured Hedge Agreement permitted by Section 8.04 of the
      Agreement entered into by a Subsidiary (other than the Borrower),

                  (k) subject to the limitations set forth in Section 9.19 of
      this Guaranty, any Completion Guaranty, or

                  (l) the guarantee in connection with the Park Creek
      Metropolitan District and Stapleton Land LLC located in Stapleton,
      Colorado, with respect to the $19,000,000 Park Creek District Subordinate
      Limited Property Tax Revenue Bonds, Series 2003A and the $10,000,000 Park
      Creek District Subordinate Limited Property Tax Revenue Bonds, Series
      2003-B, provided, that such guarantee obligations shall not be amended,
      restated or otherwise modified without the prior written consent of the
      Banks.


                                      -21-
<PAGE>

                  9.13. REDEMPTIONS, PREPAYMENTS, AND DIVIDENDS.

                  (a) The Guarantor will not directly or indirectly purchase,
      acquire, redeem or retire any shares of its capital stock at any time
      outstanding or set aside funds for any such purpose, except that, from and
      after the Closing Date, so long as no Event of Default or violation of
      Section 9.14 of this Guaranty shall have occurred or will result after
      giving effect to such purchase acquisition, redemption or retirement, the
      Guarantor may purchase, acquire, redeem or retire shares of its
      outstanding capital stock in an aggregate amount not to exceed Thirty
      Million Dollars ($30,000,000) minus any amounts paid as permitted by
      Section 9.13(c) hereof, in any yearly period measured by the anniversary
      dates of the Closing Date of the Agreement thereafter,

                  (b) The Guarantor will not directly or indirectly pay any
      principal of, make sinking fund payments in respect of or purchase any
      Indebtedness now or hereafter owing by the Guarantor other than any
      principal payment, sinking fund payment or purchase the omission of which
      would (or with the giving of notice or the lapse of any applicable grace
      period or both) accelerate, or give any one the right to accelerate, the
      maturity of such Indebtedness in accordance with the original terms
      thereof; provided, that, notwithstanding the foregoing, the Guarantor
      shall not make any payment on account of the Senior Notes in the event of
      and during the continuance of any Payment Default under the Agreement or
      this Guaranty,

                  (c) The Guarantor will not directly or indirectly declare or
      pay any Dividends, except that, from and after the Closing Date, so long
      as no Event of Default shall have occurred and be continuing hereunder and
      no Event of Default shall have occurred and be continuing under the
      Agreement, the Guarantor may pay Dividends in any aggregate amount not to
      exceed Thirty Million Dollars ($30,000,000) minus any amounts paid as
      permitted by Section 9.13(a) hereof, in any yearly period measured by the
      anniversary dates of the Closing Date of the Agreement thereafter,

                  (d) The Guarantor shall not directly or indirectly exercise
      its optional redemption rights, under the terms of any of the Senior Notes
      or the Indenture, to redeem any of the Senior Notes prior to its maturity
      date, or to deposit monies or other assets with the trustee under the
      Indenture for the payment of any one or more Senior Notes or the release
      of restrictive covenants thereunder, by defeasance, without in each case
      the prior written consent of the Required Banks, except that the Guarantor
      may take any of the above listed actions in connection with a refinancing
      of the Indebtedness represented by the Senior Notes without the prior
      consent of the Banks, in each case only so long as such refinancing does
      not (i) result in an increase in the aggregate principal amount of
      Indebtedness of the Guarantor as of the date of such proposed refinancing,
      (ii) create Indebtedness that has a maturity earlier than the final
      maturity of the Senior Notes, (iii) create a security interest in any
      property of the Guarantor or any of its Subsidiaries, or (iv) result in
      Indebtedness that is senior to the Indebtedness owing to the Banks under
      this Guaranty or the Agreement. Executed copies of any and all
      documentation evidencing or relating to such refinancing shall be
      delivered to the Agent within five (5) Cleveland Banking Days of the
      execution of such documentation,


                                      -22-
<PAGE>

                  (e) In the event of and during the continuance of any Event of
      Default under the Agreement or under this Guaranty other than a Payment
      Default, the Guarantor shall not cause the Borrower to declare, pay, or
      make, and shall not accept payment of, any Dividends in respect of Capital
      Stock of the Borrower, or, notwithstanding any other provision of the
      Agreement or this Guaranty to the contrary, any loans or advances to the
      Guarantor, (any such Dividends or loans are referred to herein as
      "Distributions") in excess of the sum of the amount sufficient to pay,
      when due, all interest payments in respect of the Senior Notes and the
      amounts sufficient to pay, when due, all taxes of the Guarantor
      (collectively, "Permitted Distributions"); provided, that any Permitted
      Distributions shall be applied by the Guarantor strictly to the permitted
      uses specified above, and

                  (f) Notwithstanding the provisions of Section 9.13(e) of this
      Guaranty, in the event and during the continuance of any Payment Default,
      the Guarantor shall not cause the Borrower to pay or make, and shall not
      accept payment of, any Distributions.

                  9.14. CASH FLOW COVERAGE RATIO. The Guarantor will not permit
the Cash Flow Coverage Ratio, at any time, to be less than 2.25:1.00.

                  9.15. CONSOLIDATED GAAP SHAREHOLDERS' EQUITY. The Guarantor
will not permit the Consolidated GAAP Shareholders' Equity to be less than (a)
on the Closing Date, Six Hundred Twenty-Five Million Dollars ($625,000,000) and
(b) at any date of determination thereafter, the sum of (i) Six Hundred
Twenty-Five Million Dollars ($625,000,000), plus (ii) one hundred percent (100%)
of the cash proceeds from any sale or issuance of equity, plus (iii) fifty
percent (50%) of the Guarantor's consolidated GAAP net income, in each case, for
the year-to-date period ended on such Fiscal Quarterly Date.

                  9.16. ENVIRONMENTAL COMPLIANCE. The Guarantor will comply with
any and all Environmental Laws including, without limitation, all Environmental
Laws in jurisdictions in which the Guarantor or any Restricted Subsidiary owns
property, operates, arranges for disposal or treatment of hazardous substances,
solid waste or other wastes, accepts for transport any hazardous substances,
solid waste or other wastes or holds any interest in real property or otherwise.
The Guarantor will furnish to the Banks promptly after receipt thereof a copy of
any notice the Guarantor or any Restricted Subsidiary may receive from any
governmental authority, private person or entity or otherwise that any
litigation or proceeding pertaining to any environmental, health or safety
matter has been filed or is threatened against the Guarantor or such Restricted
Subsidiary, any real property in which the Guarantor or such Restricted
Subsidiary holds any interest or any past or present operation of the Guarantor
or such Restricted Subsidiary. The Guarantor will not knowingly allow the
storage, release or disposal of hazardous waste, solid waste or other wastes on,
under or to any real property in which the Guarantor holds any interest or
performs any of its operations, in violation of any Environmental Law. As used
in this Section, "litigation or proceeding" means any demand, claim, notice,
suit, suit in equity, action, administrative action, investigation or inquiry
whether brought by any governmental authority, private person or entity or
otherwise. The Guarantor shall defend, indemnify and hold the Banks harmless
against all costs, expenses, claims, damages, penalties and liabilities of every
kind or nature whatsoever (including attorneys' fees) arising out of or
resulting from the noncompliance of the Guarantor or any Restricted Subsidiary
with any


                                      -23-
<PAGE>

Environmental Law, provided, that, so long as and to the extent that the Banks
are not required to make any payment or suffer to exist any unsatisfied
judgment, order, or assessment against them, the Guarantor may pursue rights of
appeal to comply with such Environmental Laws. In any case of noncompliance with
any Environmental Law by a Restricted Subsidiary, the Banks' recourse for such
indemnity herein shall be limited solely to the property of the Restricted
Subsidiary holding title to the property involved in such noncompliance and such
recovery shall not be a lien, or a basis of a claim of lien or levy of
execution, against either the Guarantor's general assets or the general assets
of any of its Restricted Subsidiaries.

                  9.17. PLAN. Neither the Guarantor nor any Restricted
Subsidiary will suffer or permit any Plan to be amended if, as a result of such
amendment, the current liability under the Plan is increased to such an extent
that security is required pursuant to Section 307 of the Employee Retirement
Income Security Act of 1974, as amended from time to time. As used herein,
"current liability" means current liability as defined in Section 307 of such
Act.

                  9.18. [Reserved.]

                  9.19. CROSS COLLATERALIZATION AND CROSS DEFAULTS. (a) Except
as expressly permitted by this Section 9.19, neither the Guarantor nor any
Restricted Company will (i) cross-default or agree to cross-default any
Permitted Debt to this Guaranty or the Debt; (ii) agree to any financial
covenants based on the performance of the Guarantor under any other Permitted
Debt (other than the Debt); or (iii) cross-collateralize, or agree to
cross-collateralize Permitted Debt (other than the Debt) owing to any one lender
under one or more different loan agreements or arrangements, provided, that the
cross-defaulted and/or cross-collateralized Indebtedness set forth on Schedule
9.19 attached hereto shall be permitted, provided, further, that such Schedule
9.19 shall not be amended or otherwise modified after the Closing Date without
the prior written consent of the Agent.

                  (b) Notwithstanding Section 9.19(a) above:

                        (i) with respect to construction projects that are
                  constructed in multiple phases and/or stabilized properties,
                  any Restricted Company shall be permitted to cross-default
                  and/or cross-collateralize any Permitted Debt with other
                  Permitted Debt (other than, in each case, the Debt), but only
                  if the phases to be cross-collateralized in and/or
                  cross-defaulted consist of a single identifiable project;

                        (ii) under a Completion Guaranty granted by the
                  Guarantor to a construction lender, the Guarantor shall be
                  permitted to agree to a financial covenant solely with respect
                  to the Guarantor's net worth, but only if (A) the Indebtedness
                  related to such Completion Guaranty is in excess of One
                  Hundred Million Dollars ($100,000,000), (B) the Indebtedness
                  related to such Completion Guaranty has a maturity of two (2)
                  years or greater, not including extensions, (C) any net worth
                  financial covenant is calculated in substantially the same
                  manner as the covenant set forth in Section 9.15 of this
                  Guaranty and requires a net worth for the Guarantor of not
                  more than Two Hundred Seventy Five


                                      -24-
<PAGE>

                  Million Dollars ($275,000,000) and (D) the aggregate of all
                  Indebtedness subject to such Completion Guaranties shall not
                  exceed Four Hundred Million Dollars ($400,000,000), exclusive
                  of the Indebtedness incurred in connection with the projects
                  set forth on Schedule 9.19 to this Guaranty;

                        (iii) under any Completion Guaranty granted by the
                  Guarantor that contains the net worth financial covenant
                  referred to in Section 9.19(b)(ii) above, (A) the construction
                  lender shall not be permitted to call upon such Completion
                  Guaranty due solely to a violation of such net worth financial
                  covenant and (B) the construction lender shall only be
                  permitted to call upon such Completion Guaranty if the project
                  is not performing (i.e. not on budget and/or schedule); and

                        (iv) with respect to Hedge Agreements permitted by this
                  Guaranty, the related documentation may provide that an Event
                  of Default will constitute an event of default under such
                  Hedge Agreement, provided, that the Hedge Agreement also
                  provides that the counterparty may not terminate or have any
                  remedy under the Hedge Agreement on account of any Event of
                  Default unless (A) the Banks have provided a written notice of
                  the Event of Default to the Borrower, (B) all applicable cure
                  periods have lapsed without the Event of Default being cured
                  and (C) the Banks may accelerate the maturity of the Revolving
                  Loans on the basis of the Event of Default.

                  9.20. OWNERSHIP OF LAND. The Guarantor shall not, and shall
not permit any Restricted Subsidiary to purchase, lease or otherwise acquire any
real property of any kind after the Closing Date, other than any real property
to be used only for the business of the Guarantor or any such Restricted
Subsidiary, in each case, as such business has been conducted prior to the
Closing Date.

                  9.21. PERMITTED NON-AFFILIATE LOAN REPORTS. Within forty-five
(45) days after each Fiscal Quarterly Date, the Guarantor will furnish to each
Bank a report setting forth (a) each Permitted Non-Affiliate Loan that is
outstanding as of such Fiscal Quarterly Date and (b) for the three year period
ending on such Fiscal Quarterly Date, the aggregate amount of gain deferred for
federal income tax purposes on the consolidated return of the Guarantor in
connection with any Non-Affiliate Construction Projects, and, if requested by
the Agents or any Bank, accompanied by all applicable tax forms filed or to be
filed in connection with such Non-Affiliate Construction Projects.

                  10. DEFAULT; REMEDIES. The Guarantor shall be in default
hereunder in the event that any of the following (each an "Event of Default")
shall occur or exist:

                  (a) Any representation or warranty made by the Guarantor, or
      any of its officers, herein, or in any written statement or certificate
      furnished at any time in connection herewith, shall prove untrue in any
      material respect as of the date it was made, or


                                      -25-
<PAGE>

                  (b) The Guarantor shall fail to observe, perform, or comply
      with any obligation, covenant, agreement, or undertaking of the Guarantor
      set forth in Sections 3, 9.5, 9.8, 9.13, 9.14 and/or 9.15 hereof, or

                  (c) The Guarantor shall fail to observe, perform, or comply
      with any obligation, covenant, agreement, or undertaking of the Guarantor
      set forth in any section or provision hereof other than those identified
      specifically in subsection (b) above and the Guarantor shall not have
      corrected such failure within thirty (30) days after the giving of written
      notice thereof to the Guarantor by the Agent or any Bank that the
      specified failure is to be corrected, or

                  (d) The Guarantor and/or any Restricted Subsidiary defaults in
      any payment of principal or interest due and owing upon any Indebtedness
      in excess of $1,000,000, or, in the case of the Guarantor, in the payment
      or performance of any obligation permitted to be outstanding or incurred
      pursuant to Sections 9.10 and/or 9.12 hereof in excess of $1,000,000,
      beyond any period of grace provided with respect thereto or in the
      performance of any other agreement, term or condition contained in any
      agreement under which any such obligation is created, if the effect of
      such default is to accelerate the maturity of the related Indebtedness or
      to permit the holder thereof to cause such Indebtedness to become due
      prior to its stated maturity or foreclose on any lien on property of the
      Guarantor securing the same, except that defaults in payment or
      performance of non-recourse obligations of the Guarantor or any Restricted
      Subsidiary shall not constitute Events of Default under this Section 10(d)
      unless such defaults have, individually or in the aggregate, a material
      adverse effect on the business or financial condition of the Guarantor;
      provided, that it shall be an Event of Default hereunder if any default
      occurs (after giving effect to any applicable grace period) under the
      Senior Notes permitted by Section 9.10(h) of this Guaranty or under the
      Indenture, or

                  (e) (i) any Restricted Subsidiary shall (A) generally not pay
      its debts as such debts become due, or (B) make a general assignment for
      the benefit of creditors, or (C) apply for or consent to the appointment
      of a receiver, a custodian, a trustee, an interim trustee or liquidator of
      itself or all or a substantial part of its assets, or (D) be adjudicated a
      debtor or have entered against it an order for relief under Title 11 of
      the United States Code, as the same may be amended from time to time, or
      (E) file a voluntary petition in bankruptcy or file a petition or an
      answer seeking reorganization or an arrangement with creditors or seeking
      to take advantage of any other law (whether federal or state) relating to
      relief of debtors, or admit (by answer, by default or otherwise) the
      material allegations of a petition filed against it in any bankruptcy,
      reorganization, insolvency or other proceeding (whether federal or state)
      relating to relief of debtors, or (F) suffer or permit to continue
      unstayed and in effect for thirty (30) consecutive days any judgment,
      decree or order, entered by a court of competent jurisdiction, which
      approves a petition seeking its reorganization or appoints a receiver,
      custodian, trustee, interim trustee or liquidator of itself or of all or a
      substantial part of its assets, or (G) take or omit to take any other
      action in order thereby to effect any of the foregoing or (H) fail to pay
      and discharge all lawful taxes, assessments, and governmental charges or
      levies imposed upon it or its income, profits, or properties, and/or all
      lawful claims for labor, materials, and supplies, which, if unpaid, might
      become a lien or charge against such


                                      -26-
<PAGE>

      properties, in all cases before the same shall become in default, or (I)
      fail to comply with any and all Environmental Laws applicable to such
      Subsidiary, its properties, or activities, or (J) fail to observe,
      perform, or fulfill any of its obligations, covenants or conditions
      contained in any evidence of Indebtedness or other contract, decree,
      order, judgment, or instrument to which such Subsidiary is a party or by
      which it or its assets are bound, and (ii) any such event or events
      described in (i) above shall in the reasonable judgment of the Banks have
      a material adverse effect on the business or financial condition of the
      Guarantor, or

                  (f) An Event of Default specified in Article X of the
      Agreement shall have occurred and be continuing, or

                  (g) The Guarantor shall (i) make a general assignment for the
      benefit of creditors, (ii) file a voluntary petition under any chapter or
      provision of Title 11 United States Code (Bankruptcy), as from time to
      time in effect (the "Bankruptcy Code") or a petition or answer seeking
      reorganization of the Guarantor or a readjustment of its Indebtedness
      under the Bankruptcy Code or any other federal or state law providing for
      relief of debtors, reorganization, liquidation, or arrangements with
      creditors, (iii) consent to the appointment of a receiver or trustee of
      its properties, or (iv) cease to be or be unable to pay its debts
      generally as they become due, or

                  (h) Relief shall be ordered against the Guarantor as debtor in
      any involuntary case under the Bankruptcy Code, or a petition or
      proceedings for bankruptcy or for reorganization shall be filed against
      the Guarantor under the Bankruptcy Code or any other federal or state law
      providing for relief of debtors, reorganization, liquidation, or
      arrangements with creditors, and the Guarantor shall admit the material
      allegations thereof, or an order, judgment or decree entered therein shall
      not be vacated or stayed within thirty (30) days of its entry, or a
      receiver or trustee shall be appointed for the Guarantor or its properties
      or any part thereof and remain in possession thereof for thirty (30) days,
      or

                  (i) The Guarantor defaults in the performance of any
      obligation in the Subordination Agreement or in the performance of any
      other agreement, covenant, term or condition in the Subordination
      Agreement,

then, in any such event (other than an Event of Default referred to in Section
10(g) or 10(h) above), and at any time thereafter, the Agent and/or the Required
Banks may at their option, by written notice delivered or mailed to the
Guarantor, do any one or more of the following: (a) declare the Debt to be
immediately due and payable, and upon any such declaration such Debt shall
become and be forthwith due and payable by Guarantor without any further notice,
presentment, or demand of any kind, all of which are expressly waived by the
Guarantor, or (b) require the Guarantor to purchase the Debt at par value,
without recourse, within ten (10) days after such notice, by paying to the
Agent, in immediately available U.S. funds, an amount equal to the unpaid
principal amount then outstanding on the Notes and any other matured or
unmatured Debt owing to the Banks, plus the unpaid accrued interest on the Notes
at the rate or rates determined in accordance with the Agreement. If any Event
of Default referred to in Section 10.07(e), 10.07(f) or 10.07(g) of the
Agreement or any Event of Default referred to in


                                      -27-
<PAGE>

Section 10(g) or 10(h) of this Guaranty shall occur, the Debt shall become and
thereafter be immediately due and payable by the Guarantor without any
presentment, demand, or notice of any kind, all of which are hereby waived by
the Guarantor. The foregoing rights, powers, and remedies of the Agent and the
Banks are not exclusive and are in addition to any and all other rights, powers,
and remedies provided for hereunder (including, without limitation, under
Section 13 hereof), at law, and/or in equity. The exercise by the Agent and/or
the Banks of any right, power, or remedy shall not waive or preclude the
exercise of any other rights, powers, and/or remedies.

                  11. MISCELLANEOUS. The foregoing rights, powers, and remedies
of the Agent and the Banks are not exclusive and are in addition to any and all
other rights, powers, and remedies provided for hereunder, at law, and/or in
equity. The exercise by the Agent and/or the Banks of any right, power, or
remedy shall not waive or preclude the exercise of any other rights, powers,
and/or remedies. This Guaranty shall bind the Guarantor and its successors and
assigns and shall inure to the benefit of the Agent and the Banks and their
respective successors and assigns including (without limitation) each holder of
any Note. The provisions of this Guaranty and the respective rights and duties
of the Guarantor and the Agent and/or the Banks hereunder shall be interpreted
and determined in accordance with Ohio law, without regard to principles of
conflict of laws. If at any time one or more provisions of this Guaranty is or
becomes invalid, illegal or unenforceable in whole or in part, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby. This Guaranty constitutes a final written
expression of all of the terms of this Guaranty, is a complete and exclusive
statement of those terms and supersedes all oral representations, negotiations,
and prior writings, if any, with respect to the subject matter hereof. The
relationship between the Guarantor and the Agent and/or the Banks with respect
to this Guaranty is and shall be solely that of debtor and creditor,
respectively, and the Agent and/or the Banks have no fiduciary obligation to the
Guarantor with respect to this Guaranty or the transactions contemplated
thereby. All representations and warranties of the Guarantor shall survive the
execution and delivery of this Guaranty and be and remain true and correct until
this Guaranty is discharged. Captions herein are for convenient reference only
and shall have no effect on the interpretation of any provision hereof. The
Guarantor acknowledges that it, either directly or indirectly through its
representatives, has participated in the drafting of this Guaranty, and any
applicable rule of construction that ambiguities are to be resolved against the
drafting party shall not be applied in connection with the construction or
interpretation of this Guaranty.

                  12. JURY TRIAL WAIVER. THE GUARANTOR WAIVES THE RIGHT TO HAVE
A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT,
OR OTHERWISE, BETWEEN OR AMONG THE GUARANTOR AND THE AGENT, THE BANKS, AND/OR
THE BORROWER ARISING OUT OF OR IN CONNECTION WITH THE AGREEMENT, THIS GUARANTY,
OR ANY OTHER AGREEMENT, INSTRUMENT OR DOCUMENT EXECUTED OR DELIVERED IN
CONNECTION THEREWITH OR THE TRANSACTIONS RELATED THERETO.

                  13. NOTICES. Except as otherwise expressly provided herein,
all notices, requests, demands and other communications provided for hereunder
shall be in writing (including telegraphic, telex, facsimile, transmission or
cable communication) and mailed, telexed, telegraphed, facsimile transmitted,
cabled or delivered, if to the Guarantor, addressed to


                                      -28-
<PAGE>

it at the address specified on the signature pages of this Guaranty, if to a
Bank, addressed to the address of such Bank specified on the signature pages of
the Agreement and if to the Agents, addressed to them at the address of the
Agent or the Syndication Agent, as applicable, specified on the signature pages
of the Agreement. All notices, statements, requests, demands and other
communications provided for hereunder shall be deemed to be given or made when
delivered or forty-eight (48) hours after being deposited in the mails with
postage prepaid by registered or certified mail or delivered to a telegraph
company, addressed as aforesaid, except that notices from the Guarantor to the
Agent or the Banks pursuant to any of the provisions hereof shall not be
effective until received by the Agent or the Banks.

                  14. CONSENT TO JURISDICTION. The Guarantor agrees that any
action or proceeding to enforce or arising out of this Guaranty may be commenced
in the Court of Common Pleas for Cuyahoga County, Ohio or in the District Court
of the United States for the Northern District of Ohio, and the Guarantor waives
personal service of process and agrees that a summons and complaint commencing
an action or proceeding in any such court shall be properly served and shall
confer personal jurisdiction over the Guarantor if served to the Guarantor at
the address listed opposite the signature of the Guarantor at the end of this
Guaranty or as otherwise provided by the laws of the State of Ohio or the United
States.

                  15. ENTIRE AGREEMENT. This Guaranty and any other agreement,
document or instrument attached hereto or referred to herein or executed on or
as of the date hereof integrate all the terms and conditions mentioned herein or
incidental hereto and supersede all oral representations and negotiations and
prior writings with respect to the subject matter hereof.

                  16. INDEPENDENCE OF COVENANTS. All covenants hereunder shall
be given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or be otherwise within the limitations of, another covenant shall
not avoid the occurrence of an Event of Default if such action is taken or
condition exists, and if a particular action or condition is expressly permitted
under any covenant, unless expressly limited to such covenant, the fact that it
would not be permitted under the general provisions of another covenant shall
not constitute an Event of Default if such action is taken or condition exists.

             [The remainder of this page intentionally left blank.]


                                      -29-
<PAGE>

                  IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to
be executed as of the date set forth above, by an officer thereunto duly
authorized.

Address:                                    FOREST CITY ENTERPRISES, INC.

1100 Terminal Tower
Cleveland, Ohio  44113                      By: /s/ THOMAS G. SMITH
                                                --------------------------------
                                                Thomas G. Smith
                                                Executive Vice President, Chief
                                                Financial Officer and Secretary

                          [Signature page of Guaranty]